Can some one explain to me the difference between intrinsic value and marlet price?
Thanks EY
This reference should help explain that:
http://en.wikipedia.org/wiki/Benjamin_Graham
Market price can fluctuate wildly and is simply the price at which sellers and buyers agree to transfer shares at a given time.
Intrinsic value is what a stock is really worth, after carefully and impassionately considering the book value (assets minus liabilities per share), indebtedness, earnings, return on assets, growth prospects, and risk factors
Certainly, I can explain the difference between intrinsic value and market price.
Intrinsic value represents the real or true value of an asset, such as a stock, bond, or commodity. It is an estimate of the asset's underlying worth based on fundamental factors. In other words, it is the actual value of an asset, taking into account factors like the company's financial health, growth potential, industry trends, and economic conditions.
On the other hand, market price refers to the current price at which an asset is being traded in the market. It is the price determined by buyers and sellers in the marketplace based on factors like supply and demand, investor sentiment, and market dynamics.
The difference between intrinsic value and market price can often lead to discrepancies. If the intrinsic value of an asset is higher than its market price, the asset is considered undervalued, presenting a potential buying opportunity. Conversely, if the intrinsic value is lower than the market price, the asset is considered overvalued, potentially indicating a selling opportunity.
To determine intrinsic value, various methods such as discounted cash flow (DCF) analysis, comparable company analysis, or asset-based valuation can be used. These methods involve evaluating the financials and future prospects of the asset.
It's important to note that market price is influenced by factors like investor sentiment, news, and market speculation, which can cause fluctuations and sometimes deviate from the asset's intrinsic value. Therefore, understanding both intrinsic value and market price is essential for making well-informed investment decisions.